Review of Greater Western Water (GWW) Annual Report 23-24

This is the second in the series of reviews of 2023-24 annual reports for water corporations based in Victoria with my first review being of Melbourne Water‘s annual report. I decided I would next look at Greatest Western Water‘s annual report as it is the newest water corporation in Victoria and there is a lot to learn from its operation as it evolves.

As with my first article, I aimed to focus and comment on governance, key performance indicators, and other financial performance metrics. With that in mind, here are a few interesting insights from GWW’s 2023-24 Annual Report:

Governance
Similar to Melbourne Water, GWW made changes to the composition of its board welcoming Nicola Burgess, Tien Kieu, Aisha Nicolay replacing Tania Fryer and Efim Thatcher. This increases the number of board members to the maximum of 9 compared to 8 the previous financial year.

The board and managing director enjoyed a total remuneration of $1.06 million in this financial year. The managing director, Maree Lang, received a nominal increase in her remuneration representing the bulk of the total remuneration and received an income of between $480,000-$489,000. Maree began her term as inaugural GWW managing director in 2021.

In the 2023-24 financial year, GWW disclosed consultancy work that was provided by chair of the board, David Middleton, outside his GWW role to Aqua Metro and Sequana. GWW awarded Aqua Metro with $19.62 million worth of contracts this financial year for delivery of capital projects reportedly unrelated to this consultancy work. GWW did not disclose the value of David Middleton’s consultancy work for Aqua Metro.

Key Performance Indicators (KPI)
In its performance report, GWW admitted it fell short of its target to increase its cash interest cover, which is an indicator of how much cash GWW has to better to pay off its debts. Furthermore, GWW increased its debt to total assets (gearing ratio) beyond its limit of 65.4% to 66.5%.

Information in this year’s annual report also suggests GWW responded to at least one sewer spill, unable to contain it within 5 hours even though the total number of sewer spills decreased to 4.23 per 100 km of sewer main.

While not a KPI, the data in the annual report suggests that GWW lost 173 ML for every 100 km of water main in its network resulting in a loss of $487,860 (at an approximate rate of $2,820 per ML) in non-revenue water. This is indicative of the aging infrastructure in GWW network where it has been heavily investing during this reporting period. Examples of this investment is seen in the delivery of Water Main Renewal in Victoria Street and Beattys Road watermain with a budget of $16.05 million and $12.2 million respectively.

Other investment has been put into bolstering GWW’s online portal for customers and developers where it has spent $22.25 million in 2023-24 and $16.14 million in 2022-23. Once this new portal is implemented, GWW hopes to improve its customer experience and improve its KPI on ‘customer responsiveness – total complaints’ where it has struggled consistently over the last two financial years to meet its target of 0.4 complaints per 100 customers.

One win for GWW is its success in increasing its proportion of recycled water over the total volume of effluent produced by 32.5%. This is made possible by investment in projects such as upgrades to Gisborne and Romsey recycled water plants and construction of western irrigation network. These investments are likely to support GWW to increase its production and distribution of this important commodity into the future.

On the safety front, GWW Total Recordable Injury Frequency (TRIFR) increased to 9.1 compared to 7.9 the previous financial year. For comparison, Melbourne Water which delivers larger and riskier capital projects reported a TRIFR of only 7.6 for 2023-24 period and 3.1 for 2022-23 period.

Financial Report

GWW reported a net profit before tax of $119,000,000 which it admits is 17% below its budget. With a total FTE employee count of 836, GWW yielded a profit of $14,234,450 per 100 FTE. For comparison, this value for Melbourne Water for the same reporting period was $19,240,225 of net profit before tax per 100 FTE.

In this reporting period, a total of $636,000 was spent on legal fees which is significant drop compared to last financial year of $5,895,000. The higher legal fees in the previous financial year was attributed to legal claims and potential litigation in relation to delivery of capital projects and services identified in the 2022-23 annual report. The nature of these disputes and legal claims remains unknown.

Total capital expenditure for 2023-24 was $297 million, slightly below the $306.13 million originally forecasted for the year under its submission to the Essential Services Commission (ESC). A total of $7.4 million is currently committed to next 12 months of program of capital projects as the result of existing contracts with the value of total capital expenditure likely to grow to $333.71 million for 2024-25 financial year according to GWW pricing submission for 2024-28.

A total of $6,601,425 was spent in engaging 44 consultants during this financial year. This is a slight decrease from previous year where GWW spent $6,662,445.50 with 45 consultants.

Resources
Greater Western Water Annual Report 2023-24 (PDF)
Greater Western Water Financial Data 2023-24 (Excel)